Vendor bid is a term that is used in two distinct ways. In some instances, the term is used to refer to a quotation for services that a vendor submits to a potential client. A second use of the term has to do with the placement of a bid in an auction situation.

When a company wishes to invite several potential vendors to submit a bid on providing specific goods or services to that business, the company will often issue what is known as a Request for Proposal, or RFP. Requests For Proposals typically include a specific format that the vendor must use to respond to the bid request, including a time frame in which the finished proposal must be returned. The specific proposal template that the vendor must use to respond will vary, depending on the wishes of the potential client.

As part of the finished proposal, the vendor bid is usually included at the end of the document, with the data filled in on a bid template supplied by the potential client. Sometimes referred to a bid proposal sheet, submitting the vendor bid in the exact structure requested is usually required if the vendor wishes to be seriously considered. Failure to submit the vendor bid in the format specified by the terms of the RFP generally results in the proposal being tossed to one side, while the issuing company focuses attention on the bids that were submitted according to instructions.

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A second application of the term vendor bid has to do with activity at a live or online auction. In this scenario, the auctioneer is authorized to make a bid on behalf of the vendor. Usually, this is a strategy that is intended to stimulate interest in the item that is up for bid, and encourage other attendees at the auction to begin placing their own bids on the item. In some cases, the bid may be placed as a tool to drive up the amount of the current highest bid, although the use of a vendor bid for this purpose is often discouraged.

Allowing an auctioneer to place a vendor bid on behalf of the current owner of the property sometimes takes place when the assets of the owner are being auctioned off to meet a tax debt. The owner may use this strategy to either attempt to recover the seized item by borrowing funds to participate in the bidding process. At other times, he or she may place the bid in an effort to drive up the final amount earned from the sale of the item and thus reduce the tax debt a little more. Generally, as long as the vendor bid placed by the auctioneer is announced to be a bid placed for the owner of the item, the practice is considered to be ethical, since everyone participating in the auction is aware of what is taking place.

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